Do the math

By Irwin Kellner, MarketWatch

PORT WASHINGTON, N.Y. (MarketWatch) -- When it comes to the president's health care legislation, the numbers simply don't add up.

There is no doubt that the cost of health care is rising at an unsustainable rate. There is also general agreement that there are some abuses that must be dealt with.

But in my view, both of these issues can be addressed without overhauling the entire system from the top down -- a system that has grown from the bottom up to be at the pinnacle of health care.

This is especially vital to understand since the president's plan is rife with inconsistencies.

For example, you can't contain health care costs by adding to demand. By covering the uninsured, their ability to purchase health care will increase much faster than the supply of doctors, hospitals and prescription drugs, thus driving up their prices.

You can't spend more and spend less at the same time. The president says his plan will cost close to $900 billion -- yet somehow reduce Washington's budget deficit.

You can't pay health care providers less while at the same time expecting them to maintain -- if not improve -- the quality of care they deliver. If this is what the president means when he talks about making the system more efficient, it just won't work.

You can't increase the cost of labor, yet expect business to step up its hiring. If anything, boosting the amount that employers will have to pay for their workers' health care will encourage them to either replace their employees with machines or outsource as much as they can to other countries.

You can't target one group (seniors) to pay for another (the uninsured). First, it's not fair, and second, seniors vote proportionately more than other groups.

You can't lower health care costs without tort reform. Frivolous lawsuits drive up health care costs by boosting the insurance premiums doctors and hospitals must pay, thus forcing them to charge more to recoup.

You can't maintain freedom of choice if the government gets more involved in running the system. Most people would prefer to choose their own doctors and hospitals for such an important service.

Costs can be contained -- but not overnight and not by increasing demand while restricting supplies. If anything, the opposite approach should be taken, such as subsidizing the cost of going to medical school, building hospitals and producing prescription drugs.

As for abuses such as insurance companies denying people coverage, allowing people to buy health insurance from companies located anywhere in the country should correct this by eliminating the monopoly that insurance companies have in a given market.

These are just two of the micro approaches that should be tried before we overhaul what is arguably the best health care system in the world.

Irwin Kellner is MarketWatch's chief economist.

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